Countries across the world are experiencing a significant increase in the integration of distributed generation (DG) in general, and renewables generation such as solar PV, wind and biomass in particular. Often this is as a result of ambitious renewables targets - and with it the costs are declining.
However, since power grids and market regulation were traditionally designed to support large, centralized generation, various technological, regulatory and economic issues have emerged, the Global Smart Grid Federation (GSGF) has found in a new study.
From a technological perspective, maintaining power quality, managing voltage and frequency levels, network losses, increased loads, standardization and interoperability are the major issues related to the integration of distributed generation on the distribution system level.
Many countries are publicly funding research and development (R&D) projects related to smart grids and distributed generation integration to address these issues. In order to mitigate considerable expenses related to the replacement of ageing grid infrastructure and the investment in additional capacity, several countries are exploring the possibilities of active demand participation to facilitate distributed generation integration. In addition, electricity storage on both the transmission (e.g. pumped hydro) and distribution (e.g. electric vehicles) levels is receiving substantial interest.
The study indicates that policy generally, and especially in Europe, is based on security of supply, sustainability and competition. A major issue, however, is that regulatory measures change frequently and vary between and even within countries. This regulatory instability and complexity makes investors reluctant to fund innovative solutions. Moreover, utilities and grid operators are regulated with a strong emphasis on cost-efficiency that limits industrial incentives to encourage R&D expenditures. The lack of technical standards also often hinders the connection process of distributed generation.
Many countries are in the process of reviewing outdated regulations in order to encourage and stimulate renewable generation. In particular, they resort to mechanisms such as feed-in tariffs, tax reductions, subsidies, power purchase agreements, loan guarantees, or accelerated depreciation. These measures have led to a considerable increase in distributed generation investment. Examples of successful policy measures include the green certificate scheme in Sweden and Norway, third-party financing options in the US, and the introduction of feed-in-tariff (projects over 10kW) and microfeed-in-tariff (projects under 10kW) financing programs in Ontario, Canada.
The integration of distributed generation is being found to have profound economic consequences.
The study found that in all countries, the costs associated with renewable distributed generation are decreasing, resulting in regulatory incentive schemes being adjusted or lifted as technologies mature and become more cost-efficient.
Some markets already exhibit the positive effects of renewable generation on the market clearing price for traditional sources. Furthermore, in rural communities such as those in Canada and Australia, or even Japan after the natural disaster, distributed generation can increase system reliability.
Distributed generation is also believed to stimulate economic progress and employment through the manufacturing and construction of new facilities and infrastructure. Lastly, increased integration of distributed generation decreases energy dependence on other countries, and thus increases national security of supply, a strong focal point in Europe.